Drivers to Face Low Gasoline Supplies, High Prices

WASHINGTON (Reuters) - The U.S. Energy Information Administration warned again on Friday that gasoline supplies will remain low this summer and that drivers will be hit with sticker shock at the pump in some parts of the country.
"Gasoline inventories going into the summer driving season are projected to be about the same or even less than last year, which could set the stage for regional supply problems that once again could bring about significant price volatility, especially in the Midwest and on both coasts," John Cook, director of the EIA's petroleum division, told lawmakers.

Testifying at a congressional hearing on national hearing policy, Cook said gasoline prices would "rise modestly" as this year's driving season begins, and EIA expects fuel prices this summer to be little different from last year's average $1.50 a gallon.

The EIA will release its official summer forecast for gasoline supplies, demand and fuel prices on April 6.

With refineries expected to be running at almost full capacity this summer, Cook said regional supply problems will quickly develop if a refinery has to temporarily reduce operations or shut down, or there are pipeline disruptions.

This lack of excess refining capacity leaves the U.S. gasoline system highly dependent on imports, he said.

However, Cook warned imports cannot serve as a "relief valve" for tight gasoline markets, because few overseas refineries can make the cleaner-burning fuel that the federal government requires to be used during the summer for controlling pollution in many parts of the country.

U.S. refining capacity has been on a downward spiral, as many oil firms have closed their facilities instead of upgrading them to meet new federal environmental regulations.

Over the last 20 years, the number of domestic refineries has fallen by almost half to 152, while refining capacity has dropped from 17.9 million to 16.5 million barrels per day. In the same period, gasoline demand has soared by 20 percent.